Blue Dots Partners

A recently published book, Lead and Disrupt, makes the case for “ambidexterity” and aligning the organization with strategy. What is ambidexterity? Leaders and teams who can simultaneously exploit their current markets while exploring future markets. “There’s lots of high-quality research that shows once companies have the right strategy, the more they can align their organization with it; that is, the more they’ve got the right people, structure, metrics, and culture in place, the better they can exploit that strategy. Exploitation, which is where companies typically make money, tends to drive out exploration.”[1] The trick, according to the authors, is to create alignment that consistently supports those often-conflicting efforts.

We have all seen examples of once successful companies that failed to catch and ride the next wave of technology or business models. It is exceptionally difficult for companies, particularly those that are publicly traded, to simultaneously deliver good performance from their current business and innovate their way into continuous growth. We can all call to mind examples illustrating the demise of companies and entire categories, replaced by new companies that became disruptive forces.

If you dust off your business history books you’ll be reminded of dozens of colossal failures. DEC makes for a memorable example in technology. It became the number two computer company by focusing on small systems. Then it failed to align its strategy with the next stage of evolution, the PC. DEC already had interesting technology and the opportunity to lead the PC revolution beginning in the 1970s. Yet, multiple times, the founder CEO, Ken Olsen, decided not to pursue the market. When the company finally believed the writing on the wall, their execution was dismal.

Then there was Ford’s Edsel. A misalignment of gigantic proportions on every Blue Dots Partners “A4” metric. The product design did not align with market trends; messaging overpromised and belied the reality of the product design; production issues and a dysfunctional organizational structure resulted in rampant quality issues; dealer mechanics were poorly trained; and the list goes on. Adding insult to injury, Ford led its overall model year campaign with the relatively expensive Edsel while consumers were cutting back on purchases in the midst of a recession. The only possible outcome was disaster rather than delight. When the car was unveiled in September 1957, consumers hit the brakes and the sales wheels fell off. Eager buyer anticipation quickly transformed into disappointment and the model was discontinued in 1959, racking up a loss of $2 billion in today’s dollars.

Of course one company’s failure is another’s opportunity. Young and private companies, and the occasional established player, see those doors open and charge through them to capture one market or create a new one.

What happened to Ford with the Edsel would never happen to Tesla, right? Elon Musk is not just ambidextrous, he is an industrial octopus with many, equally adept arms. However, as we have pointed out in a previous blog, Tesla will be under immense pressure to reverse its track record of delays to instead deliver on the high expectations its advance marketing and CEO have set for the Model 3.

Five takeaways from all this:

1. It never pays to ignore reality.
2. Disastrous misalignment can happen to anyone.
3. Despite the pressure to squeeze every dollar out of the current market, it is essential to balance the present with the future and align the organization to support that balance.
4. While planning your own growth strategy, it can be revealing to take the role of a disruptor. Identify what you would do to disrupt your business if you were a competitor or new player attacking your business with a completely different approach.
5. The book Lead and Disrupt won’t solve your challenge but it may provide some ideas.

[1] Prof. Charles O’Reilly, Stanford Business School Insight, June 9, 2016.